IMF to hold back Cyprus bailout funds

The International Monetary Fund (IMF) says it will not give Cyprus a further 88 million euros (USD 108 million) in funds under its bailout program after Cypriot lawmakers decided to suspend a foreclosure law.

The IMF announced the postponement of the loan installment on Thursday.

“Following today’s suspension of the existing legislation on foreclosure, critical requirements for the completion of the fifth program review are now no longer met,” the IMF said in a statement.

The IMF further said the “next steps” would be discussed with authorities in Cyprus, adding, “We look forward to continued cooperation, and will agree with the authorities on next steps in the period ahead.”

Parliamentarians in Cyprus said they decided to suspend the foreclosure law in order to give the government time to draft additional insolvency legislation to act as an extra buffer aimed at protecting those who lost their jobs or witnessed cuts to their salaries.

Cyprus received its last tranche of bailout loans in November after Nicosia amended laws on foreclosure and on forced sales of mortgaged property, as part of conditions of the loan.

September last year, the IMF agreed to grant 84.7 million euros in financial aid to Cyprus, as part of a 10-billion-euro bailout program to the country, known as the Extended Fund Facility.

The bailout is aimed to save Cyprus from bankruptcy and possibly guarantee its future in the eurozone.

The country plunged into economic meltdown in 2012 as Greece’s financial crisis spilled over, crippling Cypriot banks and forcing depositors to accept reductions in the value of their bank accounts.

Europe witnessed a financial crisis in early 2008. The worsening debt crisis has forced the EU governments to adopt harsh austerity measures, triggering protests against spending cuts in many European countries.